From the desk of Louis Sykes @haumicharts and Steve Strazza @sstrazza

The Crypto space just experienced its worst day since the height of the Covid crash.

Bitcoin was down over 30% on an intraday basis, while Ethereum was almost cut in half.

We see this recent action aligning Crypto with what's taking place throughout the market. Bulls have had a more challenging time in recent months, and risk assets are coming under increasing pressure. 

Speaking to this topic, here's what we outlined in a note earlier this week:

One more chart that I think is interesting is the Bitcoin / Gold ratio hitting it’s upside objective and reversing hard.

How many people are telling you to sell Bitcoin to buy Gold?

I don’t hear any at all….

If we’re below 36:1 in the ratio between Bitcoin and Gold, then we prefer Gold.

Of course, we had no idea a 30%...

From the desk of Steve Strazza @Sstrazza and Grant Hawkridge @GrantHawkridge

In recent months, we've seen a rare bid in defensive assets as investors position for more mixed markets and messy action in the weeks and months ahead.

These defensive areas of the market have stopped trending lower on relative terms and many are rebounding off of very logical support levels... Gold Miners and Bonds are two examples of safe-haven assets that we recently got involved with on the long side in order to express this view.

Now add the following developments to the mix:

• A growing number of risk assets are hitting our upside objectives or running into logical levels of overhead supply
• Intermarket indicators are becoming increasingly mixed and some are even signaling a bearish shift in investor risk appetite
• Sentiment is running hot
• ...

This is the video recording of the May 20th Town Hall Meeting w/ Willie Delwiche

05/20/21 2PM ET

From the desk of Steve Strazza @sstrazza

As the market has become increasingly mixed, it's time to switch up our strategy a bit.

As we outlined in our post yesterday, for the first time in about a year, we are shorting stocks.

But this statement requires an asterisk...

We are shorting some stocks. And at the same time, we're still buying the leaders as plenty of stocks continue to show impressive strength -- particularly those with cyclical or value characteristics. That's where we're focusing for long ideas.

As for shorts, it's all growth. That is where the weakness is. We're not only seeing deterioration and relative weakness at the index level for growth stocks -- the internals are also deteriorating beneath the surface.

This is simply a tale of two markets. As growth-heavy averages like the Nasdaq roll over, the leadership areas are registering bullish breadth thrusts and carrying on higher like business as usual.

Does one of these groups eventually catch up or ...

From the desk of Willie Delwiche.

A box of family photos showed up at my house this weekend. 

Some are relatively recent, others stretch back nearly a century. Together, they tell a story of generation after generation experiencing life in its many stages. Each one captures a moment

One that really stuck out to me was an image of a camping trip from more than 90 years ago. You can see an old car with a canvas tent pitched against it. At a picnic table, we see a lady and two young boys. The younger of these two is my grandfather. Next to him is his brother. Behind him is their mother (my great-grandmother).

“Now that's camping done right,” I thought as I inspected the picture.

From the desk of Steve Strazza @sstrazza

First of all, thanks to everyone as always for participating in this week's Mystery Chart.

As noted in the Mystery post last week, the rounding bottom in question is a pattern we've become all too familiar with since last year.

The reason for this is simple: The chart was merely a derivative - or just another way to illustrate and visualize the overarching theme that's driving so many of our cross-asset relationships these days... The sustained rotation out of Growth  and into Value.

We've written a lot about this theme since last year, and more recently have been pounding the table on a new theme that's taken the forefront for markets across the globe... We believe we're in for a trendless or rangebound period for risk assets as well as an increasingly bifurcated or mixed market. 

Much of this divergence in performance among various groups can be directly attributed to this trend toward value and away from growth.

Not only are we seeing...

From the desk of Willie Delwiche.

Key Takeaways:

• Speculative excesses are being unwound as risk appetites reverse
• Upward pressure on bond yields a headwind for equities
• Liquidity is the lifeblood of the market and right now it is evaporating

While the Fed is musing about tapering, the market, as usual, is already in action. Upward momentum in bond yields and an economy that has soaked up liquidity have become headwinds for equities at a time when investors are already re-thinking risk appetites.

The S&P 500 is a week and a half removed from its highest weekly close on record, but many of the areas of the market that saw the biggest run-ups over the past 2+ years are in the midst of tumultuous pullbacks. After gaudy returns on the way up, investors should expect equally gaudy reversals on the way down. By way of example, the ARK Innovation ETF is more than 30% off its peak but is still up 180% since Jan 2019. Bitcoin too is 30% from its high but is...

We recently had on a counter-trend trade in gold that worked out (we took off the trade at our profit target this week), and we're starting to see a similar rationale and setup in bonds.

I'm going to let Steve Strazza do most of the talking here because he had an excellent riff on this in the latest R.P.P. Report:

We debuted a new scan recently which goes by the name- All Star Momentum.

All Star Momentum is a brand new scan that pinpoints the very best stocks in the market. This time around, we have incorporated our stock universe of Nifty 500 as the base. Among the 500 stocks that we follow, this scan will pump out names that are most likely to generate great returns.

While we go through our lists of sectors and stocks on a weekly basis, we thought of launching a product that would highlight the names that are the strongest performers in our universe and those that are primed for an explosive move.

Just like The Outperformers scan, this is a list of stocks belonging to the sectors that display relative strength in the market at any given point in time. Since sector rotation is the lifeblood of a bull market, we will be ahead of the curve before the gears keep shifting.

From the desk of Willie Delwiche.

Key takeaway: Amid the economic optimism that is seen in surveys and magazine covers, the stock market is experiencing an unwinding in speculative excesses that has just begun. This shift in risk appetite makes a healthy sentiment reset like we saw in March a less likely outcome this time around. More probably is that we are moving from excessive optimism to some meaningful degree of pessimism. This is the area of the sentiment curve when price is most vulnerable to correction. With upside economic surprises waning and near-term breadth trends more mixed, the choppy environment of the past few weeks could not only persist, but even intensify. 

Sentiment Report Chart of the Week: Magazine Covers

Like headlines, magazine covers can be more anecdote than an indicator. But they do give a sense of the public mood and the contrast between what appeared on the cover of The New Yorker in March 2020 (an empty Grand...

You know by the time the journalists get wind that things are good, it's probably almost time for it not to be anymore.

We just saw the best 52-week period for stocks in over 75 years. You know what they were telling you the week that rally started?